SAVING YOUR ELDERLY PARENTS FROM FINANCIAL FRAUD

Talk to them about their money (and those who could take it away). Elders are financially defrauded daily in this country.  Just a tiny percentage of these crimes are made public. In fact, the National Adult Protective Services Association (NAPSA) estimates that only 1 in 44 cases of elder financial abuse are reported. A recent NAPSA study found that 11% of seniors had been financially "abused, neglected or exploited" within the past year.1        Friends, family & caregivers perpetrate much of this financial abuse. They commit 90% of it, NAPSA estimates. Major damage may result to an elder's finances and physical and mental health: victims of elder financial exploitation are four times more likely to go into a nursing home than their peers, and nearly 10% of the victims end up relying on Medicaid.1   Frauds range from big scams to little schemes. You likely know about the common ones: the grandparent scam ("Grandpa, I'm in jail in _____ and I need $___ to make bail"), the utility company scam (one criminal keeps the elder busy in the yard as the other burglarizes their home), the lottery scam (a huge prize awaits, the elder need only pay a few thousand up front to take care of associated taxes). Others are subtler: home health aides severely overcharging an elder for their services, relatives or caregivers using a financial power of attorney to draw down an elder's bank or investment accounts.   Talking about all this may help to prevent it. Perhaps the best way to introduce the topic is by referring to what happened to someone else - a story coming up on the news or in the paper, an article online. AARP's Fraud Watch Network emails a monthly newsletter highlighting common scams; it also maintains a map showing per-state occurrences of such crimes.2   A 2014 Allianz Life survey discovered something very encouraging. Seniors who have talked about the issue of financial exploitation with others seem less likely to succumb to it, especially seniors who have talked about such risks in the company of a financial professional.2   The insurer asked more than 2,000 Americans about their awareness of financial fraud - men and women aged 65+, and select family members and friends aged 40-64. It found that 97% of seniors who talked about finances with a hired professional were likely to check their monthly credit and financial statements, while only 84% of those who talked about their finances with no one were likely to do so. It also found that 93% of seniors who communicated with a hired professional were likely to refrain from signing a financial document they could not fully understand; that was true for just 82% of seniors who had never addressed financial topics in the company of professionals, friends or family.2    Another pair of examples: 85% of elders who discussed personal finances consistently shredded or destroyed sensitive financial paperwork while just 69% of those who refrained from such discussion did. Thirty-seven percent of seniors who talked about their finances with a professional were also more likely to have a co-signer for their bank accounts, as opposed to 14% of those who were handling their personal finances solo.2   Have the conversation; have a look at Mom or Dad's financial situation. It is only prudent to do so. The National Center on Elder Abuse says that the average financial fraud perpetrated on an elder siphons $30,000 out of his or her finances. Think about how devastating that is, especially for a poorer retiree; that may equal a year's worth of medical expenses, a majority of an elder's yearly income, or a double-digit percentage of his or her remaining retirement savings. Elders rich and poor need to be warned about such crimes.3 Citations:      1 - napsa-now.org/policy-advocacy/exploitation/ [4/30/15] 2 - allianzlife.com/about/news-and-events/news-releases/preventing-elder-financial-abuse [4/20/15] 3 - tinyurl.com/p4y6pa7 [4/20/15]   Sincerely, Bill Morrissey, CFP® and Tammy Prouty, CFP® Sound Financial Planning, Inc. Primary Office 425 Commercial St., Ste 203 Mount Vernon, WA 98273 Phone: (360) 336-6527 info@soundfinancialplanning.net Secondary Office 650 Mullis St., Ste 101 Friday Harbor, WA 98250 (360) 378-3022 www.soundfinancialplanning.net PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO MARKETING PRO INC.

THE A, B, C & D of Medicare

Breaking down the basics & what each part covers.

Whether your 65th birthday is on the horizon or decades away, you should understand the parts of Medicare - what they cover, and where they come from.
    
Parts A & B: Original Medicare.  America created a national health insurance program for seniors in 1965 with two components. Part A is hospital insurance. It provides coverage for inpatient stays at medical facilities. It can also help cover the costs of hospice care, home health care and nursing home care - but not for long, and only under certain parameters.1
 
Seniors are frequently warned that Medicare will only pay for a maximum of 100 days of nursing home care (provided certain conditions are met). Part A is the part that does so. Under current rules, you pay $0 for days 1-20 of skilled nursing facility (SNF) care under Part A. During days 21-100, a $157.50 daily coinsurance payment may be required of you.2
  
If you stop receiving SNF care for 30 days, you need a new 3-day hospital stay to qualify for further nursing home care under Part A. If you can go 60 days in a row without SNF care, the clock resets: you are once again eligible for up to 100 days of SNF benefits via Part A.2
  
If you have had Medicare taxes withheld from your paycheck for at least 40 calendar quarters during your lifetime, you will get Part A coverage for free.1
 
Part B is medical insurance and helps pick up some of the tab for outpatient care, physician services, expenses for durable medical equipment (scooters, wheelchairs), and other medical services such as lab tests and varieties of health screenings.1,3
 
Part B isn't free. You pay monthly premiums to get it and a yearly deductible (plus 20% of costs). The premiums vary according to the Medicare recipient's income level; in 2015, most Medicare recipients pay $104.90 a month for their Part B coverage. The current yearly deductible is $147. Some people automatically get Part B, but others have to sign up for it.2,4
 
Part C: Medicare Advantage plans. Insurance companies offer these Medicare-approved plans. Part C plans offer seniors all the benefits of Part A and Part B and a great deal more: most feature prescription drug coverage and many include hearing, vision, dental, and fitness benefits. To enroll in a Part C plan, you need to have Part A and Part B coverage in place. To keep up your Part C coverage, you must keep up your payment of Part B premiums as well as your Part C premiums.2
 
To say not all Part C plans are alike is an understatement. Provider networks, premiums, copays, coinsurance, and out-of-pocket spending limits can all vary widely, so shopping around is wise. During Medicare's annual Open Enrollment Period (Oct. 15 - Dec. 7), seniors can choose to switch out of Original Medicare to a Part C plan or vice versa, although any such move is much wiser with a Medigap policy already in place.5
 
How does a Medigap plan differ from a Part C plan? Medigap plans (also called Medicare Supplement plans) emerged to address the gaps in Part A and Part B coverage.  If you have Part A and Part B already in place, a Medigap policy can pick up some copayments, coinsurance and deductibles for you. Some Medigap policies can even help you pay for medical care outside the United States. You have to pay Part B premiums in addition to Medigap plan premiums to keep a Medigap policy in effect.6
 
Medigap plans don't feature prescription drug coverage anymore. Medigap policies have been sold without drug coverage since 2005.6
   
Part D: prescription drug plans. While Part C plans commonly offer prescription drug coverage, insurers also sell Part D plans as a standalone product to those with original Medicare. As per Medigap and Part C coverage, you need to keep paying Part B premiums in addition to premiums for the drug plan to keep Part D coverage going.1,2
 
Every Part D plan has a formulary, a list of medications covered under the plan. Most Part D plans rank approved drugs into tiers by cost. The good news is that Medicare's website will determine the best Part D plan for you. Go to medicare.gov/find-a-plan to start your search; enter your medications and the website will do the legwork for you.7
 
Part C & Part D plans are assigned ratings. Medicare annually rates these plans (one star being worst, five stars being best) according to member satisfaction, provider network(s) and quality of coverage. As you search for a plan at medicare.gov, you also have a chance to check out the rankings.8 
   

Citations. 1 - dailyfinance.com/2013/05/14/medicare-explained-part-a-b-c-d/ [5/14/13] 2 - medicare.gov/coverage/skilled-nursing-facility-care.html [3/30/15] 3 - info.tuftsmedicarepreferred.org/medicare-matters-blog/bid/74844/Medicare-Part-A-B-C-and-D-What-does-it-all-mean [10/1/13] 4 - medicare.gov/your-medicare-costs/part-b-costs/part-b-costs.html [3/30/15] 5 - medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/when-can-i-join-a-health-or-drug-plan.html#collapse-3192 [3/30/15] 6 - medicare.gov/supplement-other-insurance/medigap/whats-medigap.html [3/30/15] 7 - medicare.gov/part-d/coverage/part-d-coverage.html [3/30/15] 8 - medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/five-star-enrollment/5-star-enrollment-period.html [3/30/15]

Sincerely, Bill Morrissey, CFP® and Tammy Prouty, CFP® Sound Financial Planning, Inc.

Primary Office 425 Commercial St., Ste 203 Mount Vernon, WA 98273 Phone: (360) 336-6527 info@soundfinancialplanning.net Secondary Office 650 Mullis St., Ste 101 Friday Harbor, WA 98250 (360) 378-3022 www.soundfinancialplanning.net

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO MARKETING PRO INC.

THE VALUE OF DOUBLE-CHECKING YOUR RETIREMENT STRATEGY

As you approach your "third act," does it need to be adjusted?
 

Motivational speaker Denis Waitley once remarked, "You must stick to your conviction, but be ready to abandon your assumptions." That statement certainly applies to retirement planning. Your effort must not waver, yet you must also examine it from time to time.1
 
For example, the level of risk you chose to tolerate at 35 or 40 may not be worth tolerating at 55 or 60. Additionally, you may realize that you will need more retirement income than previously assumed. With those factors and others in mind, here are some signs that you may need to double-check your retirement strategy. 

Your portfolio lacks significant diversification. Many baby boomers are approaching retirement with portfolios heavily weighted in equities. As many of them will have long retirements and a sustained need for growth investing, you could argue that this is entirely appropriate. If your retirement is near at hand, however, you might want to consider the length of this bull market and the possibility of irrational exuberance.
 
The current bull has lasted about twice as long as the average one and brought appreciation in excess of 200%. It could rise higher: as InvesTech Research notes, two-thirds of the bull markets since 1955 have gained 20% or more in their final phase. Few analysts think a "megabear" will follow this historic rally, but even a typical bear market brings a reality check. The lesser bear markets since 1929 have brought an average 27.5% reversal for the S&P 500 and lasted an average of 12 months.2
 
A poor quarter makes you anxious. You start watching the market like a hawk and check up on your investments more frequently than you once did. Some of this vigilance is only natural as you near retirement; after all, you have far more at stake than a millennial investor. Even so, this is a sign that you may be uncomfortable with the amount of risk in your portfolio. A portfolio review with a financial professional could be in order. A semi-annual or annual review is reasonable. One bad quarter should not tempt you to abandon a strategy that has worked for years, only to examine it in the face of sudden headwinds.
 
You find yourself listening to friends & pundits. Your tennis partner has an opinion about when you should claim Social Security. So does your dentist. So does a noted radio personality or columnist. Their viewpoints may be well-informed, but they are likely expressing what they would do as they share what they feel you should do. If you seem increasingly interested in the financial opinions of friends, acquaintances and even total strangers, or the latest "hot tip" on the market, this hints at anxiety or restlessness about your financial strategy. Perhaps it is warranted, perhaps not. It may be time to reexamine some assumptions.
   
You wonder about the demands your lifestyle may make on your finances. You want to travel, golf, and have fun when you retire, and those potential lifestyle expenses now seem larger than they once were. Here is another instance where you may want to double-check your retirement savings and income strategy.
 
You see what were once "what-ifs" becoming probabilities. You sense that you or your spouse might face a serious health issue in the not-so-distant future. It looks as if you may end up raising one of your grandchildren. It seems likely that you will provide eldercare for a sibling who may move in with you. These life events (and others) may prompt a new look at your financial assumptions.
 
You think you will retire to another state. Say you retire to Florida. There is no state income tax in Florida. So your retirement tax burden may decrease with such a move (though some states have higher property taxes to offset the lack of state taxes). To what degree will geographic considerations affect your retirement income, or need for income? Such geographic factors are worth considering.3
 
You wonder how deeply inflation will impact your retirement income. A recent Morningstar analysis of retiree spending data compiled by the federal government noticed something interesting: for the typical retiree, spending declines in inflation-adjusted terms between age 65 and age 90. So the assumption that retirees increase household spending over time in light of inflation may be flawed. Of course, inflation has been mild for the past several years. If inflation spikes, however, that assumption might prove wholly valid.3
  
Looking at your retirement strategy anew has merit. As the years go by, priorities change and needs arise. New questions call for appraisals of old assumptions. Reviewing your approach to investing and saving at mid-life is only rational, for your retirement strategy must suit the objectives you now have before you rather than those you set in your past.

Citations. 1 - quotes.lifehack.org/quote/denis-waitley/you-must-stick-to-your-conviction-but/ [4/16/15] 2 - fortune.com/2015/04/16/taming-the-bear-market/ [4/16/15] 3 - tinyurl.com/odyle9s [12/25/13]

Sincerely, Bill Morrissey, CFP® and Tammy Prouty, CFP® Sound Financial Planning, Inc.

Primary Office 425 Commercial St., Ste 203 Mount Vernon, WA 98273 Phone: (360) 336-6527 info@soundfinancialplanning.net Secondary Office 650 Mullis St., Ste 101 Friday Harbor, WA 98250 (360) 378-3022 www.soundfinancialplanning.net

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO MARKETING PRO INC.

WHERE THE MONEY COMES FROM

As the tax filing deadline approaches, Money Magazine has offered some interesting statistics on our annual ritual.  In the early months, the IRS says that roughly 83% of all returns have resulted in refunds, with an average refund of $2,893 per return.  In all, roughly eight out of ten filers qualify for a refund, and this year's refund is in line with previous year averages.

Meanwhile, the IRS website notes that in the past few years, roughly 47% of Americans were below the threshold where they had to pay income taxes-which is where the famous "47 percenters" phrase came from in the Romney presidential campaign.  However virtually all of those Americans paid FICA taxes.  In all, 185.5 million income tax returns were filed last year, but only 34,000 estate tax returns and just 335,000 gift tax returns.  The government collected $1.64 trillion in individual income taxes, compared with $353 billion in business income taxes.  In aggregate, Californians paid the most taxes, at $369 billion, well ahead of Texas ($265 billion) and New York ($251 billion).  At the other end of the spectrum, the citizens of Vermont paid $4.3 billion and people and companies living in Wyoming paid $4.9 billion.

Finally, there's an interesting comparison.  The King James Bible totals around 700,000 words, whereas the U.S. Federal Tax Code numbers 3.7 million words.

Sources:   http://money.cnn.com/2015/03/26/pf/taxes/average-tax-refund-irs/index.html?iid=SF_PF_River http://facts.randomhistory.com/tax-facts.html http://www.sars.gov.za/AllDocs/Documents/Tax%20Stats/Tax%20Stats%202014/TStats%202014%20Highlights%20WEB.pdf http://www.irs.gov/uac/SOI-Tax-Stats-IRS-Data-Book

Sincerely, Bill Morrissey, CFP® and Tammy Prouty, CFP® Sound Financial Planning, Inc.

Primary Office 425 Commercial St., Ste 203 Mount Vernon, WA 98273 Phone: (360) 336-6527 info@soundfinancialplanning.net Secondary Office 650 Mullis St., Ste 101 Friday Harbor, WA 98250 (360) 378-3022 www.soundfinancialplanning.net

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.

IDENTITY THEFT TIPS

Every 2 seconds, someone becomes a victim of identity theft.  That means by the time you finish reading this sentence, the next victim could be you!

 

As your trusted financial professional we are not only concerned about how to make your portfolios last or protect you from unexpected catastrophic risks with insurance, but we are also concerned about protecting your personal information and identity.  Please review and keep handy our tip sheet which will help you to protect yourself.

PRINT/SAVE TIP SHEET

Sincerely, Bill Morrissey, CFP® and Tammy Prouty, CFP® Sound Financial Planning, Inc.

Primary Office 425 Commercial St., Ste 203 Mount Vernon, WA 98273 Phone: (360) 336-6527 info@soundfinancialplanning.net Secondary Office 650 Mullis St., Ste 101 Friday Harbor, WA 98250 (360) 378-3022 www.soundfinancialplanning.net

Image by Robert Hare Stavers Photography

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

RETURN ON COLLEGE

Let's say you're giving your niece or grandson some advice on which major to select in college. Do you tell them to get an art degree, or take courses in social sciences? Or should they focus on business and finance?

The decision should not ignore their natural abilities and interests, of course. But if they're looking for the best return on their tuition dollar, then they might consider spending their time in the computer sciences and math buildings.

This information comes from a report published by PayScale.com, which helps people manage their careers and figure out what they're worth on the job market. PayScale's research team tracked the median salary for people who completed its salary survey online. They then compared the 20-year earnings of people following different careers with what was earned, on average, by competing workers with a high school diploma but no college degree. Then they subtracted the cost of 4 years of college tuition, to arrive at a return on investment figure-the additional money the degree provided. Advanced degrees like law and medicine were excluded; the survey focused on bachelors degrees.

The results were striking. Business and finance majors came away with a respectable $331,345 average ROI over 20 years, but they actually finished a distant third on the list, just ahead of sales, marketing and public relations ($318,212). The highest ranking majors, by this metric, were computer and math, whose degree-holders saw a net return on their tuition investment of $584,339 over the 20 years after graduation. These nerdy individuals nosed out the architecture and engineering graduates, whose average ROI came to $561,475.

Life, physical and social sciences majors fared somewhat less well, earning almost exactly $250,000 more than their high school diploma competition. Graduates with an arts, design, entertainment and related degree came in last in the survey; they are expected to make a little over $125,000 as a result of their college training.

Interestingly, the PayScale website also tracks the average return on tuition investment for different colleges. Graduates of Harvey Mudd College in Claremont, CA can expect to earn nearly $1 million over the 20 years after graduation, with a typical starting salary north of $75,000-with a 4-year college investment of $237,700. Numbers 2-10 on the rankings include the California Institute of Technology ($901,400 earnings, $221,600 cost); The Stevens Institute of Technology in Hoboken, NJ ($841,000; $232,000), the Colorado School of Mines in Golden, CO ($831,000; $112,000); Babson College in Wellesley, MA ($812,800; $230,200); Stanford University ($809,000; $233,300); the Massachusetts Institute of Technology ($798,500; $224,500); Georgia Institute of Technology ($796,300; $86,700); Princeton University ($795,700; $217,300); and the Virginia Military Institute ($767,300; $95,700).

You can look up your own alma mater here: http://www.payscale.com/college-roi/

Sources:   http://www.payscale.com/college-roi/ http://www.bloomberg.com/news/articles/2015-03-05/the-career-with-the-biggest-financial-payoff?hootPostID=293b20e2f9470947cb0facdcea7f70ea

Sincerely, Bill Morrissey, CFP® and Tammy Prouty, CFP® Sound Financial Planning, Inc.

Primary Office 425 Commercial St., Ste 203 Mount Vernon, WA 98273 Phone: (360) 336-6527 info@soundfinancialplanning.net Secondary Office 650 Mullis St., Ste 101 Friday Harbor, WA 98250 (360) 378-3022 www.soundfinancialplanning.net

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.

IS GOOD NEWS REALLY BAD NEWS?

You may have read last week that the U.S. stock market took a tumble based on what would seem like really good news: that the U.S. unemployment rate is falling faster than anybody expected. If you're scratching your head, you're not alone.

First, let's focus on the good news and what it may mean. At the beginning of 2015, there were 3 million more Americans at work than the year before. The unemployment rate had fallen to 5.5%-a level that economists at the International Monetary Fund had projected that the U.S. wouldn't achieve until 2018 at the earliest.

Then came the U.S. Bureau of Labor Statistics report for February, which showed a seasonally-adjusted increase of 295,000 jobs (nonfarm payroll employment), well ahead of projections. America has not only pulled out of the long unemployment slump triggered by the Great Recession; it is now creating jobs faster than at any time since 2000, roughly equal to the go-go economy of the late 1990s. The government report noted that there are 1.7 million fewer unemployed persons today than there were at this time last year. More importantly, perhaps, there are 1.1 million fewer people in the "long-term unemployed"category, which is now down to 2.7 million overall.

How can this be considered bad news for U.S. stocks? There are three possible explanations. First, the labor markets may be creeping toward that place where businesses have to compete for talent and pay their workers higher wages. When payrolls go up, it eats into corporate profits. There is little direct evidence this is happening yet-overall, wages are up just 2% in the past year, roughly even with inflation. But there are reports that small business employers have more unfilled job openings than at any time since April 2006. Meanwhile, the average workweek is inching up, which suggests that companies need people at their desks longer than they did before.

If the unemployment rate hits 5.4%-which could happen this Spring-then our economy will have reached what Federal Reserve economists consider to be "full employment."This, of course, does not mean what those words actually say; it is a coded way of saying that the balance of negotiating power will have started to shift from employers to workers.

Reason number two is bond rates. While stocks were tumbling last week, bond yields were moving in the opposite direction in what was described as the biggest one-day selloff since November 2013. The yields on 10-year Treasuries rose from 2.11% to 2.239% in a single day. As bonds become more competitive with stocks, demand for stocks goes down-and so do stock prices. Interestingly, the stocks with the highest dividends tended to be the biggest losers in the selloff, suggesting that some investors who were temporarily relying on stocks for income are shifting back to bonds.

But perhaps the biggest reason for the market's angst is concern about the next move by Federal Reserve Board. Fed chairperson Janet Yellen has made it clear that the health of the U.S. labor market will factor into her decision on when to finally allow short-term interest rates to rise. The good unemployment news could accelerate that schedule; at the worst, it probably confirms the current unofficial timetable of graduated rise beginning in June. For the impact that would have, go back to reason number two.

How credible are these three concerns? Should we be worried? It's helpful to remember that higher employment means more money in the pockets of consumers, which can trigger a virtuous circle of more spending, more corporate revenues, a healthier economy. We've learned from past experience that the stock market is easily spooked by shadows and headlines, by good news as well as bad news. Bond rates are still pretty low compared with historical numbers, and the possible threat of higher payrolls is not exactly the same as seeing them show up in the actual workforce. (Remember those 2.7 million long-term unemployed workers still searching for any kind of a paycheck.)

Short-term traders, who measure their investment horizon on the second hand of their watch, can panic if they want to. Those of us who measure our investment horizon with a calendar should be celebrating another milestone in the U.S. economy's long and fitful recovery.

Sources:   http://www.bls.gov/news.release/empsit.nr0.htm http://www.reuters.com/article/2015/03/06/us-usa-economy-idUSKBN0M20E620150306 http://www.economist.com/blogs/freeexchange/2015/03/americas-jobs-report?fsrc=scn/tw/te/bl/thewinningstreakcontinues http://www.bls.gov/news.release/empsit.nr0.htm http://blogs.wsj.com/economics/2015/03/06/economists-react-to-the-february-jobs-report-full-employment/ http://www.nasdaq.com/article/stocks-tumble-as-dollar-bond-yields-soar-on-us-jobs-report-20150306-00624

Sincerely, Bill Morrissey, CFP® and Tammy Prouty, CFP® Sound Financial Planning, Inc.

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